Suburban Bailout

A few years ago I was attending a city council meeting where the agenda included a request for the city to take over a private road. The proposal had a positive recommendation from the staff and, of course, the city's engineering consultant because the property owners agreed to pay the costs (including the engineer's fees) of bringing the road up to city standards. As one of the city council members remarked: "You mean we get a free road?"

Free, indeed.

Of course, the property owners on this dead-end cul-de-sac were not gifting the city a "free road" out of generosity. They wanted something in return. It was their expectation that the city would now assume the long term maintenance obligation associated with their roadway. Not only would the city plow the snow and mow the ditches but it would also -- at least in theory -- be responsible for sealing the cracks, filling the potholes and, someday, rebuilding the roadway when it fell apart.

And when I pointed out -- in a detailed memo with an attached spreadsheet showing my calculations -- that the amount of taxes the property owners would pay between the time the city took over that road and the time they would need to make good on their obligation to fix it would amount to less than 20% of what was needed, well.....let's just say that was a revelation as uncomfortable as it was indisputable. No amount of tact will allow a staffer to stay employed long if they insist on pointing out such difficult truths, especially when the congenial consulting engineer brushes the insight aside by noting -- with no amount of irony -- that, "we can't possibly know what will happen two or three decades from now."

For residents, private streets offer seclusion and a lower upfront price tag. For developers, they’re an opportunity to build without municipal costs and design constraints. But homeowners in Rosemount and elsewhere, faced with road maintenance costs that will only rise as streets age, are asking local officials to make their streets public.

“It’s going to be a huge cost to rebuild in the future, 20 years down the road,” Rehman said. “It doesn’t make sense to have homeowners pick up that kind of cost.”

It's instances where cities take over private roads that give credence to this statement by Bastiat.

It's a very strange place that we've come to in America where that last sentence can be spoken, let alone printed. Almost all private roads are, by definition, closed systems; loops or dead end cul-de-sacs. Their only reason for existing is to serve the property owners along them. They have have no other function.

If it "doesn't make sense" for the people that live along a dead end road to pick up the cost of maintaining it, what does make sense? In the Ponzi Scheme that is the financing of America's suburbs, that would be the local government, that magical entity that, while it is made up of a collection of neighborhoods of people, is somehow expected (and in the first life cycle is able) to provide more services and amenities than those people are willing to pay for. From the article:

The private model works as long as homeowners associations have the spending power and wherewithal to keep up with maintenance. But for those that haven’t planned well or simply can’t afford it, future fixes loom large.

“It’s not surprising that some of them might have said, ‘Well, we might have made this deal originally, but we’d rather have the government take care of these things,’ ” Nelson said.

The fascinating thing about these transactions -- private roads becoming public -- is that they make no financial sense for the other property owners in the city. Zero. The homeowners with the private road are already paying taxes to the local government. Those taxes don't go up at all; the city gets zero additional revenue. Yet now the city must take money from everyone else to subsidize the costs of these once-private roads. How does that make any sense?

Well, if you believe in the wealth enhancing notion of a "free road" or if you believe that there is an overriding public interest in the city owning every possible square feet of asphalt (streets are assets, after all), then it might. And, in the narrow vision of the bureaucratic silo where codes and hierarchy are paramount concerns, all we need to make this good is to have the private road brought up to the divine standards of the city. Again, from the article:

“We heard a lot of people say, ‘We pay taxes just like everyone else, yet we have to maintain our own streets,’ ” said City Engineer Larry Poppler. “That was kind of the cry from a number of neighborhoods.”

In response, the city created a policy in 2009 that requires homeowners to go through a multi-step process, including obtaining the consent of all their neighbors, before their street can be made public. A big part of that process is bringing the street up to municipal standards, so the city isn’t saddled with a rundown street. But for homeowners, those fixes can cost thousands of dollars.

If property owners can’t afford to pay for a smaller, less engineered road how does widening, straightening, flattening and making it more intensely engineered suddenly make it affordable?

It's astounding how we're so trained to think in one life cycle, to never ponder the long term maintenance costs. If property owners can't afford to pay for a smaller, less engineered road how does widening, straightening, flattening and making it more intensely engineered suddenly make it affordable?

Back in 2012, I wrote Assessing our Future about the process local governments use to illegally extract money from property owners through the assessment process. I provided this after-the-fact analysis for cities now struggling to pay for roads they never should have taken over:

It is public infrastructure, taken over by the city for maintenance through a public process, and it is now the city's to maintain at full cost of that maintenance, minus any increase in property value the project might create. If the city did not think this infrastructure served a public purpose, it should not have taken it over and assumed the maintenance liability.

Expect to see this kind of nonsense as we watch more and more of America's suburbs and exurbs enter the terminal Desperation Phase of the Growth Ponzi Scheme. We Americans have an incredible ability to delude ourselves; the absurd notion that local governments (a collection of us) can step in where property owners can no longer afford their own private roads is just another variation on that theme. As Strong Towns advocates, we can't prevent mass delusion, but we can work to establish an alternative model for achieving prosperity so there is a viable option to hysteria (and all it's handmaidens) when the Illusion of Wealth vanishes. We need to start building Strong Towns.

Charles Marohn - known as "Chuck" to friends and colleagues - is a Professional Engineer (PE) licensed in the State of Minnesota and a member of the American Institute of Certified Planners (AICP). Chuck is the Founder and President of Strong Towns. He has a Bachelor's degree in Civil Engineering from the University of Minnesota's Institute of Technology and a Masters in Urban and Regional Planning from the University of Minnesota's Humphrey Institute.